Finance minister Kevin Falcon said all B.C. ministries will have to be fiscally prudent in the new fiscal year, with no room for public sector wage hikes. The B.C. budget is expected to be unveiled Tuesday.Photo by
Adrian Lam

Determined to balance the books before the next election, B.C. Finance Minister Kevin Falcon introduced a “disciplined” budget on Tuesday that will put a lock on spending, tax small businesses and sell off government assets.

While Budget 2012 offered few surprises, Falcon said he hopes to raise $700 million through the sale of “surplus properties,” including the government-owned Liquor Distribution warehouses in Kamloops and Vancouver.

Projecting a deficit of $968 million this fiscal year and modest economic growth of 1.8 per cent, sale of the properties is expected to help the government hit surpluses of $154 million by 2013-2014 and $250 million in 2014-2015.

Introducing his first budget as finance minister, Falcon said the government is also prepared to hike the corporate tax rate to 11 per cent in 2014 -- an increase of one per cent. But this will only be triggered if the financial situation nosedives, he said.

“We do this with some reluctance,” Falcon said in a speech peppered with the word “prudence.” He added later to reporters: “Everyone has to do their bit.”

The business community offered more pointed feedback. Jock Finlayson of the Business Council of B.C. said, “It’s not something we recommended, and we are not jumping up and down about it.”

“That would hurt medium-sized business that are already doing their part for the economy,” said Shachi Kurl of the Canadian Federation of Independent Business. “It would send a bad message to the investment community.”

While that increase remains to be decided, what is certain is a freeze on the small corporate business tax, which was supposed to drop to zero from from 2.5 per cent by 2012.

Falcon said the tax will be revisited “only after the fiscal situation has improved,” noting the government remains committed to balancing the budget, as mandated by law, by 2013-2014, an election year.

The government also expects an increase in the tobacco tax, brought in to help offset a tax loss from axing the HST, will help generate additional revenues that can be put toward bringing down the deficit.

Spending was limited to health, education and social services. Health saw an overall increase of $1.5 billion to its operation budget over three years, while education’s “block funding” remained unchanged at $4.7 million per year.

Education will also receive the already announced $165 million to deal with issues of class composition, which is nowhere near enough according to Susan Lambert, president of the BC Teachers’ Federation.

“We’re cut to the bone right now,” she said. “We’re talking about more closed schools, crowded classrooms and even less for special-needs children.”

Money from the government’s contingency fund was also earmarked for B.C.’s overburdened justice system and the organization that provides services for adults with developmental disabilities.

The budget committed $237 million to the justice system, recently brought under review by Premier Christy Clark, and $144 million to the beleaguered Community Living B.C. Another $294 million was put toward income assistance.

NDP finance critic Bruce Ralston chastised the government for not adding new funding for skills training. He also called the government’s plan to sell public assets to raise money “short-sighted.”

“They offered nothing in the way of hope or opportunity,” he said, noting taxpayers will be burdened with increases to medical premiums (four per cent, starting next year), ferry fares and Hydro rate hikes.

Mary Ellen Turpel-Lafond, B.C.’s representative for children and youth called it a grim budget for families.

“This will hurt people who are poor or vulnerable,” she said. “There’s been a real abandonment of the premier’s families-first agenda. It’s a very harsh and punishing budget.”

The carbon tax, which increases for the last time this year, will also be reviewed, Falcon said.

He also announced some unexpected tax measures aimed at bolstering B.C.’s economy, helping seniors and offering relief to first-time homebuyers.

He said the government will eliminate the provincial jet tax fuel for international flights — a move he said will make B.C. more accessible to Asian markets and create more jobs.

Existing municipal tax-rate caps for B.C.’s major port terminals were also made permanent, Falcon said.

Falcon said deficit forecasts for 2011-2012 improved by $594 million, down from earlier projections of $3.1 billion, to $2.5 billion. The government is now predicting surpluses by $154 million in 2013-14 and $250 million in 2014-2015. During that time, taxpayer-supported debt-to-GDP ratio, a key measure of affordability, will spike at 18.3 per cent in 2014-2015, up five per cent from 2008/2009.

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